Approaches to whole life performance

Methodologies

Broadly speaking there are 3 approaches to whole life performance and costing:

  • comprehensive;
  • statistical; and
  • practical.

All 3 methodologies have their advantages and disadvantages. All are in use by practitioners to some degree, both academically and in practice.

They are not mutually exclusive and in an ideal world all whole life assessments should be comprehensive, reflect the statistical nature of component performance and have practical application.

The comprehensive approach

A comprehensive whole life model includes all cost issues that are likely to be associated with an asset. Costs are broken down to the smallest detail. For example, the whole life performance issues and costs associated with a kitchen may be separated into:

  • installation costs:
    • design costs;
    • organisational costs including management and administrative costs;
    • material costs;
    • labour times and rates for loading, unloading and installing;
    • wastage allowance;
    • overheads and profits;
  • maintenance and replacement costs:
    • for each mode of failure the frequency and repair option;
    • replacement costs build up as for installation costs;
    • disposal costs or recycling credits;
  • whole life performance issues:
    • maintenance strategies;
    • performance in fire;
    • accessibility issues.

A comprehensive approach has the virtue of being specific about all the costs and factors involved in a whole life assessment. It allows for sophisticated understanding and 'what if' analysis of the whole life cost issues.

The main drawbacks are the time it takes to prepare such a report and assimilating the detailed data to produce results.

The statistical approach

A statistical approach recognises the inherent uncertainties of forecasting and risk associated with component performance.

Some of the typical issues a statistical or probabilistic approach deal with include:

  • pattern of component failure,
  • pattern of component replacement,
  • future value of money.

Pattern of component failure

Not all components will fail in year 20 - typically component failure will follow some form of failure pattern spread about an average value.

There are many models to describe failure distributions, for example:

  • the normal distribution,
  • weibull distribution, and
  • the gamma distribution.

To apply these distribution curves to a whole life cost assessment a substantial body of data is required.

Pattern of component replacement

The usual assumption when carrying out a whole life cost assessment is that components will be replaced on a like-for-like basis but in practice this is unlikely to be the case. Often technological advances and regulatory requirements require a different component when replacement takes place. For example, single glazed windows now tend to be replaced by double or triple glazed units. Changes in Building Regulations now require boilers to meet a minimum standard of efficiency.

Future component replacement options can be modelled using statistical methods borrowed from analysis of 'options' and 'derivatives' in the stock market. The results from this analysis are in terms of probability.

Future value of money

The government guidance on discount rates is to use a value of 3.5%. This may vary; in 2001 the rate was 6%.

In practice, most whole life cost evaluations are based on a prescribed discount rate. Modelling changing discount rates may be carried out as part of a sensitivity analysis of the model.

The processes are similar to those used in the financial markets.

The practical approach

In practice whole life assessments define the costs and parameters that are important to arrive at a meaningful conclusion to help make decisions for a given project.

Whole life cost assessments are time consuming. So a practical approach can help to arrive at answers to questions of choice and best value. Different strategies may be employed at different stages in the life cycle:

  • concept phase;
  • design phase;
  • construction phase;
  • occupancy phase.

Concept phase

Broad whole life performance and cost principles can inform the design brief. For example:

  • build no higher than 2 storeys to keep construction and future maintenance costs low; and
  • incorporate details to create a sheltered environment such as wide overhanging eaves.

Design phase

At this stage detailed option appraisals may be made for key components which contribute significantly to the whole life cost. For example:

  • services equipment;
  • external cladding;
  • assess and incorporate energy and fuel saving measures;
  • consider improvements in insulation.

The purpose is to minimise the in-use costs for a given capital cost.

Occupancy phase

The whole life cost plans are used as histograms to plan maintenance and finance allocations.

These plans should be capable of being generated at all levels of detail. For example, 4 levels are described below. Each building or estate will have its own requirements both in terms of physical make up and asset management breakdown. These will determine the number of levels by which analysis should be possible:

  • by component or assembly, such as roof covering or boiler;
  • by element, such as heating system or external envelope;
  • by building function or rooms, such as classrooms, hospital wards and external landscaping;
  • by building or group of buildings.